Big Five is the name colloquially given to the five largest banks that dominate the banking industry of Canada: Bank of Montreal (BMO), Bank of Nova Scotia (Scotiabank), Canadian Imperial Bank of Commerce (CIBC), Royal Bank of Canada (RBC), and Toronto-Dominion Bank (TD). The term Big Six is sometimes used to include Canada’s next largest bank, National Bank of Canada.
All of the five banks are operationally based in Toronto. All five banks are classified as Schedule I banks that are domestic banks operating in Canada under government charter. The banks’ shares are widely held, with any entity allowed to hold a maximum of twenty percent.
According to a ranking produced by Standard & Poor’s, in 2017, the Big Five are among the world’s 100 largest banks, with Toronto-Dominion Bank, Royal Bank of Canada, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce at 26th, 28th, 45th, 52nd and 63rd place, respectively.
The Big Five banks, listed in order of market capitalization on the Toronto Stock Exchange as of December 1, 2016, with their current corporate brand names and corporate profiles according to their latest annual report, all monetary amounts are in billions of Canadian dollars, are:
|Official name||Bank brand(s)||Operational head office||Legal incorporation||Assets (C$ bn)||Revenue (C$ bn)||Capitalization (C$ bn)||Branches
|Royal Bank of Canada||RBC Royal Bank||Place Ville-Marie, Montreal
Royal Bank Plaza, Toronto[note 1]
|Toronto-Dominion Bank||TD Canada Trust||Toronto-Dominion Centre, Toronto||Toronto||$1104.37||$34.35||$118.1||1,165||85,000|||
|Bank of Nova Scotia||Scotiabank (full-service)
|Scotia Plaza, Toronto||Halifax||$856.49||$26.4||$89.6||1,040||89,000|||
|Bank of Montreal||BMO Bank of Montreal||Saint Jacques Street, Montreal
First Canadian Place, Toronto[note 2]
|Canadian Imperial Bank of Commerce||CIBC (full-service)
Simplii Financial (direct)
|Commerce Court, Toronto||Toronto||$463.60||$14.8||$42.1||1,100||42,239|||
In modern history, Royal Bank (RBC) has always been the largest by a significant margin, although TD Bank has caught up to RBC in recent years. Up to the late 1990s, CIBC was the second largest, followed by Bank of Montreal, Scotiabank, and TD Bank. During the late 1990s and beyond, this ranking changed due to several reorganizations. Royal Bank acquired Royal Trust in 1993, while Scotiabank purchased National Trust in 1997. As Scotiabank found no merger partners among the other banks in the big five group, it instead expanded its international operations and passed the Bank of Montreal in size. TD Bank merged with Canada Trust, which was for a long time the largest trust in Canada, thus vaulting TD into the number two spot. While there were no major changes to Bank of Montreal, CIBC’s first unsuccessful foray into the US market led it to shed its assets there, dropping it to the number five spot.
Four of the Big Five Canadian banks have acquired independent investment banks, whose activities included corporate banking and full service brokerage. From 2000 onwards, these investment banking subsidiaries, RBC Dominion Securities, BMO Nesbitt Burns, CIBC Wood Gundy, and McLeod Young Weir Ltd., were all rebranded to RBC Capital Markets, BMO Capital Markets, CIBC World Markets, and Scotia Capital, respectively. Nonetheless, their bank holding company parent still use the old names as a brand for their full service brokerage under wealth management, plus the old name still remains the broker dealer subsidiary for their investment bank in Canada.
Other large Canadian banks
All monetary amounts are in billions C$.
|Official names||Operational head office||Assets (C$ bn)||Deposits (C$ bn)||Capitalization (C$ bn)||Branches
|National Bank of Canada||Complexe Maisonneuve, Montreal||$156.3||$87.1||$11.8||448||20,100|||
|HSBC Bank Canada||HSBC Canada Building, Vancouver||$80.0||$46.6||145||6,000|||
|Laurentian Bank of Canada||1360 René-Lévesque, Montreal||$24.5||$20.1||$1.0||158||3,700|||
|Canadian Western Bank||Canadian Western Bank Place, Edmonton||$14.8||$12.5||$2.0||40||1,796|||
Large non-bank financial institutions
All monetary amounts are in billions C$.
|Official names||Operational head office||Assets (C$ bn)||Branches
|Desjardins Group||Lévis, Quebec, Canada||$258.4||1,080||47,655|||
|Alberta Treasury Branches||ATB Place, Edmonton||$43.1||173||5,021|||
Desjardins Group and Alberta Treasury Branches are major regional financial institutions. Desjardins, a federation of 313 autonomous credit unions (French: caisses populaires), is one of the largest financial institutions in Quebec and also operates in some regions of Ontario with substantial Franco-Ontarian populations. Alberta Treasury Branches (operating as ATB Financial) is a Crown corporation owned by the Alberta provincial government that was originally established in 1938 after the province’s attempt to impose social credit policies on federally-regulated banks failed.
In 1998, the Bank of Montreal proposed a merger with Royal Bank around the same time that CIBC proposed to combine with the Toronto-Dominion Bank. The banks argued that these mergers would enable them to compete globally with other financial institutions. This would have left Canada with only three major national banks. The mergers were reviewed by the Competition Bureau of Canada, which declared that negative effects (such as higher user fees and local branch closures) from the mergers would far outweigh the benefits of allowing the mergers. Ultimately, it was then Finance Minister Paul Martin who rejected both proposed mergers. The issue since has not been revisited by succeeding Finance Ministers; it has been cited as a reason that the Canadian economy easily weathered the 2007 subprime mortgage financial crisis compared to other nations, and the aforementioned recognition of numerous Canadian banks on the Bloomberg 2011 list of twenty strongest large banks in the world.
Potential foreign forays
The weakness of the Canadian dollar and high U.S. bank stock prices were commonly cited as obstacles to purchasing assets south of the border. However the 2007 subprime mortgage crisis reversed this trend. In the aftermath of the crisis, the Canadian dollar steadily climbed against the U.S. dollar, achieving parity in early 2008 and trading as high as 30 cents above the USD in late 2008. The strength of the Canadian dollar and the relative weakness of U.S. bank prices have led commentators to suggest that the big five banks could consider an expansion into the United States.
Because of the recent recession, Royal Bank of Canada has now eclipsed Morgan Stanley in terms of market valuation. According to figures compiled by a recent Bloomberg report, investors today are willing to pay about $2.60 for every dollar of book value at a Canadian bank, compared with $1.70 in the United States. That ratio is about the reverse of where it stood in late 1999.
The last time the U.S. financial markets were weak, many Canadian bank CEOs were criticized for not making a more concerted buying effort. Some believed that these CEOs preferred to wait for Ottawa to allow domestic mergers before expanding into the US. The federal government ended up refusing to allow the mergers and is unlikely to do so now. Analysts also pointed out that Canadian banks have much stronger balance sheets today than they did 10 or 15 years ago, putting them in an even better position to be aggressive.
In October 2007, TD purchased Commerce Bancorp, a medium-sized US bank with a strong branch network in the middle Atlantic and Florida. As of March 2008, their stated plan was to merge Commerce with their existing TD Banknorth subsidiary, calling the new bank TD Commerce Bank. However, Commerce Bank based in Worcester, Massachusetts challenged the new name. As a result, TD renamed its US banks TD Bank at end of 2009. TD is the sixth-largest bank by branch network in North America, after JPMorgan, Bank of America, Wells Fargo, PNC, and US Bank. It is also the largest foreign bank in the United States holding almost $200 billion (USD) in deposits.
Main article: Banking in Canada § Regulation
Canada’s federal government has sole jurisdiction for banks according to the Canadian Constitution, specifically Section 91(15) of The Constitution Act, 1867 (30 & 31 Victoria, c.3 (UK)), formerly known as the British North America Act, 1867. Meanwhile, credit unions/caisses populaires, securities dealers and mutual funds are largely regulated by provincial governments.
The main federal statute for the incorporation and regulation of banks, or chartered banks, is the Bank Act (S.C. 1991, c.46), where Schedules I, II and III of this Act list all banks permitted to operate in Canada under these three distinct categories.
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Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.